In recent days, FreightWaves’ reporter Noi Mahoney covered the ongoing Canadian port strike. The articles titled “Dockworkers at Canada’s West Coast ports launch strike” and “Dockworkers strike continues at Canada’s West Coast ports” shed light on the situation. (Link to articles and Thursday’s FreightWaves Now appearance can be found in the original report.)
Here’s a brief summary for shippers:
Negotiations between the International Longshore and Warehouse Union Canada (representing port workers) and the British Columbia Maritime Employers Association (BCMEA, representing ship owners, agents, and terminal operators) are currently on hold, awaiting further discussion with federal mediators.
The Canadian government appointed two mediators to oversee the negotiations. While BCMEA agreed to enter mediation/arbitration, ILWU Canada declined to do so.
A vote held in June saw over 99% of union members in favor of striking, indicating that reaching an agreement without mediation or arbitration might be challenging.
CN (Canadian National Railway) warned that if the work stoppage continues, it could take several weeks or even months to address the impact on its railway network.
ILWU Canada has been operating without a contract since the previous one expired on March 31.
Approximately 85% of containerized import volume at the Port of Vancouver serves Canadian trade, while two-thirds of containerized imports at the Port of Prince Rupert are destined for consumption centers in the United States.
Additionally, there is a threat of a strike by UPS Teamsters at the end of the month. Teamsters General President Sean M. O’Brien stated that the largest single-employer strike in American history seems inevitable. UPS handles a significant portion of package deliveries, and this could particularly affect consumer packaged goods (CPG) companies operating in the direct-to-consumer and subscription box segments.
The article also highlights a shift in retailers’ inventory management practices. While non-consumable items like furniture and clothing have seen reductions in inventory levels, consumables, including CPG items, are targeted for higher in-stock rates in the mid-to-high 90% range. General Mills’ recent earnings report, which disappointed Wall Street, may indicate retailers’ increased focus on managing inventories of everyday items. Rising interest rates have added to the cost of carrying inventory, making retailers more concerned about consumer health translating into higher elasticities, which could impact margins.
Shippers’ focus has shifted towards freight service levels and supply chain resilience as top priorities. At a recent FreightWaves’ Future of Supply Chain event, L’Oreal’s director of transportation ranked service, cost, and carbon as their team’s top priorities. Despite the CPG industry’s goal of improving gross margins, logistics costs remain a significant portion of their expenses. The pandemic has emphasized the importance of supply chain issues, leading to larger freight budgets and a focus on having capacity available for future tightening of freight markets. Some companies, like L’Oreal, have implemented innovative solutions like the “Backstop,” a premium freight service to prevent freight from falling to the spot market.
Shippers’ prioritization of service levels and supply chain resilience may explain why van contract rates have remained above spot rates over the past five quarters. Shippers are maintaining good relationships with their carrier partners by not pushing freight costs to the limit. However, whether carriers will reciprocate this gesture when the market tightens again remains uncertain.
